The recovery calculator: the unpleasant math of drawdown

Recovery math is unfair: every percent of loss needs a larger percent of gain to return to where you were. And the deeper the drawdown, the harsher the asymmetry.

Why it matters

Because “I’ll only risk down to here” is half the truth without the recovery table. A manager or trader who underestimates drawdown depth is forced into bigger risks to recover — and the circle tightens.

Calculate before risking

Use the recovery calculator to see the growth needed to return for several drawdown scenarios; this number will make your loss limit serious. Also read the “What is drawdown?” article in this journal and the risk guide.

Frequently asked questions

Why is recovering a 50% loss harder than gaining 50%? Because the base shrank: from 100 you fell to 50; to get back to 100 you must add 50 on top of 50 — 100% growth on that base.

Does this table matter for managers too? Yes; look at a manager’s historical drawdown and compute the growth needed to recover — then you read “temporary drawdown” correctly.

Which calculator is best for planning loss limits? This one; set loss limits backward from the level where recovery becomes near-impossible.

Can I plan my losses with the recovery calculator? You can see their mathematical reality — and that alone suffices; the number the calculator shows is usually the best antidote to emotional decisions. Real planning means setting, before the drawdown, a loss limit that never forces you to execute that table.

Summary

See the recovery math once so you never forget it: the recovery calculator.

Three uses of the recovery calculator

• Seeing the growth needed for each drawdown level
• Setting loss limits backward from the worst case
• Reading a manager’s “temporary drawdown” correctly
• See the number once and you will remember it forever
• Deep drawdowns build a tighter circle

The recovery calculator: See it.